Chapter 4The Not-for-Profit Environment and Performance Measures
Learning objectives
- Identify the unique aspects of the not-for-profit (NFP) environment.
- Identify the unique accounting and reporting practices used by NFP entities.
- Identify tools available to NFP entities to measure performance.
- Identify measures used related to an organization’s service efforts and accomplishments.
Introduction
NFPs are different from for-profit entities in many ways. This chapter will explore the areas that make NFPs unique. It will also discuss how to report and evaluate an NFP, including using ratios and other evaluation tools.
The NFP environment
Key differences
What makes NFP entities different from normal businesses? Well, there are several things. There are environmental factors related to NFP entities that are different, in a number of ways, from businesses. These differences result in different financial reporting objectives and different financial reporting for NFP entities.
FASB identified three key characteristics of an NFP entity in the FASB Accounting Standards Codification (ASC) glossary. These characteristics are illustrated in exhibit 4-1.
Now let us look at these three major characteristics further:
- Contributions of significant ...
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